CTS Q2 Earnings Call Highlights

Key Points

• CTS reported strong second-quarter results: Revenue rose 7% year over year to $144.8 million, while adjusted gross margin reached a record 41.5% and adjusted EPS increased about 30% to $0.74.
• Diversified markets drove growth: Medical revenue jumped 45% and industrial sales rose 16%, while aerospace and defense is expected to strengthen in the second half. Transportation sales declined 2%, but new awards totaled approximately $163 million, including a roughly $100 million sensor contract.
• CTS raised its 2026 outlook to sales of $565 million-$585 million and adjusted diluted EPS of $2.55-$2.70, supported by continued diversified-market growth despite uncertainty in transportation, tariffs and input costs.

CTS NYSE: CTS reported second-quarter 2026 revenue growth and record adjusted profitability, led by continued expansion in its diversified end markets, while transportation sales declined modestly.

In his first earnings call as chief executive officer, Pratik Trivedi said the company’s Evolution 2030 strategy and diversification efforts remain central to its value-creation plans. CTS reported second-quarter sales of $144.8 million, up 7% from the prior-year quarter and 4% sequentially. Diversified end-market sales increased 15% year over year and accounted for 59% of total revenue, compared with 55% a year earlier. Transportation sales declined 2%.

“Robust growth across our diversified end markets drove strong financial results and improved the quality of our earnings despite modest declines in transportation,” Trivedi said.

Record Margins and Earnings

CTS reported an adjusted gross margin of 41.5%, a record level and an increase of 270 basis points from the second quarter of 2025. Adjusted EBITDA margin rose about 240 basis points year over year to 25.4%.

Adjusted diluted earnings per share reached a record $0.74, up about 30% from $0.57 in the prior-year quarter. CFO Ashish Agrawal said the quarter included approximately $0.07 per share of favorable effects from foreign currency movements and a larger customer reimbursement. The company said it expects research-and-development expenses to move closer to normal levels going forward, though customer reimbursements may continue to occur as development programs progress.

Foreign currency changes favorably affected quarterly sales by approximately $1.4 million and provided about $1 million of benefit to gross margin, according to Agrawal.

CTS generated $33 million in operating cash flow during the quarter. Capital expenditures totaled $4.6 million, producing approximately $29 million in free cash flow. The company ended the quarter with $108 million in cash and $55 million in borrowings.

During the period, CTS repurchased about 64,000 shares for $3.5 million. It had $78 million remaining under its share-repurchase authorization at quarter-end.

Medical, Industrial Bookings Support Diversification

Medical revenue totaled $28 million, rising 45% from a year earlier and 14% sequentially. Trivedi attributed the increase to broad demand for sensing and actuation technologies used in advanced diagnostics and therapeutic treatments. The medical segment recorded a book-to-bill ratio of 1.21.

Trivedi said capacity expansion intended to support medical demand was already in place, and the company expects volumes in therapeutic applications to become more normalized in the second half of the year. Agrawal said medical carries the strongest gross margins among CTS’s diversified end markets, though industrial and aerospace and defense also generate healthy margins.

Industrial sales increased 16% year over year and 6% sequentially to $40 million. The segment’s book-to-bill ratio was 1.11, and CTS added two customers in process instrumentation and cryogenic nanopositioning applications. The company cited design wins involving distribution components, industrial printing, EMI filters, temperature sensing, heat pumps, refrigeration, and pool and spa systems.

Aerospace and defense sales were $18 million, down 15% from the prior-year quarter but up 4% from the first quarter. CTS said the year-over-year decline primarily reflected the timing of program funding and government contract awards. The segment posted a 1.23 book-to-bill ratio, and the company added a customer focused on defense satellite communications.

Trivedi said government funding had begun to flow into several key programs, supporting increased customer activity. CTS expects aerospace and defense revenue to strengthen in the second half, supported by bookings, backlog and funding deployment.

Transportation Awards Offset Softer Sales

Transportation sales were $59 million, down 2% both year over year and sequentially. However, CTS secured approximately $163 million in new transportation business awards during the quarter, including a roughly $100 million sensor award from a major North American original equipment manufacturer for an integrated wheel-speed accelerometer sensing application.

The company also added a North American electric-vehicle customer for a seat-track position sensor used in vehicle safety systems. Awards spanned North America, Japan, China and Europe, covering CTS’s sensor portfolio and foot controls. Total booked transportation business stood at approximately $1.2 billion at the end of the quarter, up about $100 million from the first quarter.

Agrawal said transportation book-to-bill generally remains close to 1 because customer orders in that market are short cycle. He also said CTS expects modest commercial-vehicle market growth in the second half, supported by freight fundamentals and potential pre-buy activity ahead of 2027 emissions regulations. The company is still assessing its future market share as Cummins continues a supply-base transition involving a second source.

Management noted that new transportation program launches can initially pressure gross margin before productivity improvements are achieved over the platform life cycle.

Raised 2026 Outlook

CTS raised its full-year 2026 outlook, assuming current market conditions continue. The company now expects sales of $565 million to $585 million and adjusted diluted EPS of $2.55 to $2.70.

Trivedi said diversified-market growth is expected to continue across medical, aerospace and defense, and industrial. For transportation, CTS expects global light-vehicle production to be flat to modestly down amid tariff, geopolitical and consumer-demand uncertainty.

The company said it does not anticipate a material impact from recent tariff announcements, but it continues to monitor Section 232 tariff changes, precious-metal inflation, U.S.-Mexico-Canada Agreement negotiations and other input-cost pressures. Agrawal said CTS is working with customers and suppliers on pricing and cost recovery, with the range in guidance reflecting potentially different outcomes from those discussions.

About CTS (NYSE:CTS)

CTS Corporation NYSE: CTS is a global manufacturer and supplier of electronic components and sensors, headquartered in Lisle, Illinois. Established in 1896 as the Chicago Telephone Supply Company, the firm has evolved over more than a century to become a diversified provider of high-precision products for a wide range of end markets.

The company's core business encompasses the design, development and production of sensors and actuators, frequency control devices such as quartz crystals and filters, multilayer ceramic capacitors, and inductive components.

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